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Here's What It Means to Be a Long-Term Investor

By Rachel Warren, Jason Hall, and Toby Bordelon – Dec 9, 2021 at 6:40AM

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Three Motley Fool contributors discuss.

When the market is especially volatile, it's often easy to get caught up in the day-to-day movements of your favorite stocks rather than stay focused on the big picture. In this segment of Backstage Pass, recorded on Nov. 15, Fool contributors Jason Hall, Rachel Warren, and Toby Bordelon discuss what it means to be a long-term investor.

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Jason Hall: ProShopGuy Mike, Mike's chiming in here. Let's see here, I'm going to read this comment here. It says, "Okay. I will poke the bear again like I did on the morning show." David Gardner on the Rule Breaking Investor podcasts, allows any near him to hit dead arm him if he uses the long-term to describe investor. His position the term investor already means long-term mindset. Bill Mann and John Rotonti struggled with this."

I get it. Here's my counterpoint. Most people don't think about it that way, and it's our job, to tie the terms long-term and investors together. That's why I'm OK with continuing to say long-term investors. Because most people don't think about it. They hear investing, they hear trading, they hear speculating, they hear gambling, and they hear the same word. Most people hear it.

When we say long term investor, I think it's important because it sends a clear message to people that might not have David's wonderfully important, Foolish message there. Toby, Rachel.

Rachel Warren: I'll jump in. I think it's a great thing to reiterate. I know for me when I first started learning about investing years ago, I didn't even know that long-term investing was a thing. I thought that investing was more speculative and even in recent years I've obviously studied the strategy more and become a Fool myself and a Foolish investor.

When I'll talk to people, in just my normal everyday life at some of the most common things you hear about, "Oh, I don't know if I get into investing because maybe I don't have a lot of money", or "it just seems so risky" and all those common reasons. I think that's one of the things I love so much, about long-term investing.

Nothing in life, and nothing in investing is completely devoid of risk. But I do think long-term investing is one of the most effective means of managing your risk well, and also making investing work for you. It takes a lot of the guesswork out of it, takes a lot of the complication out of it.

You don't have to be a financial expert to be a successful long-term investor. It's buying those great companies and keeping on buying them no matter what's happening in the market. Yeah, I think it's a great distinction to make for sure, those are just my thoughts.

Jason Hall: Toby.

Toby Bordelon: The problem I have with long-term, short-term is what do those words even mean?

Jason Hall: Even those within themselves, there's context, right?

Toby Bordelon: Right. They mean different things to different people. I think depending on how you define this. There's difference between investor and trader, but I think you can be a short-term investor, depending on how you are using that term, depending on what you mean when you say long-term.

When I say long term, I generally assume decades. If I were to say some of these short term investor, I would say maybe you're investing for five years, that short-term, but I think it probably is in a lot of contexts. These are my perspective, but you certainly can invest over five-year time frame.

Jason Hall: Yeah. The Internal Revenue Service considers long term 366 days, right?

Rachel Warren: Oh, wow. 

Toby Bordelon: Yeah. A year or more, you're long-term for tax purposes. I definitely think I would make a distinction between trader, investor, not so sure I'd be too hung up on short-term, long-term.

Jason Hall: Mike, thank you for that because that was a fun little conversation. We can't all be David, we don't have his influence and cachet. I enjoyed that guys.

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